Wealth advisers and investment migration consultants are looking ahead to which wealth hubs will have the highest demand, in a post coronavirus world.
As of now the deadly coronavirus has infected almost 7 million people worldwide and caused over 300,000 confirmed deaths globally. This pandemic has created panic and anxiety in global markets, in boardrooms and in homes everywhere.
Advisers and consultants that serve High Net Worth Individual (HNWI) clients are keen to know which wealth hubs will demand their expert services most, in a post-pandemic world.
Markets for investment migration & wealth management post Covid 19
In order to map out which HNWI hubs will be requiring wealth advisory and investment migration services in the near future, we explore a few key criteria, namely:
- The existing population of HNWIs and/or UHNWIs (and previously forecasted growth in these populations)
- The Passport Index or strength of each wealth hubs own passport
- The anticipated economic impact the pandemic will have on GDP growth
- The penetration of Covid19 in key markets
According to Knight Frank’s 2019 and 2020 wealth reports, Asia on the whole has had one of the fastest growing millionaire (HNWI) and UHNWI (US$30 Million+) population. Prior to the pandemic, India, Vietnam, China and Indonesia were all set to be some of the most emergent hubs for UHNWI populations over the next five years. In the Middle East, Egypt was earmarked to have the most rapidly growing affluent class in the coming years.
These forecasts though, had not factored in Covid-19 sweeping across the world as ferociously as it has. So, until we see the impact that the impending global economic downturn has and how long this corona virus plagues most nations, we can’t ascertain how far off the mark these wealth forecasts are.
To qualify our forward-looking analysis though, we will take a bird’s eye view of the International Monetary Fund’s (IMF) forecasted GDP growth rates for 2020 and 2021 which shed light on the short-term economic impact that specific markets anticipate. In parallel, to paint a more accurate picture of wealth hubs post-pandemic, we will also explore some epidemiological statistics on Covid-19 in specific countries, focusing on Asia, Africa and LATAM.
Future Populations of High Net Worth and Ultra High Net Worth Individuals
As we can see from the below data (Knight Frank Reports), in Asia; Vietnam, Indonesia and India had some of the highest projected growth for their UHNW populations, 64%, 57% and 73% respectively. Expansive China though, will continue to dwarf other countries in the region as it is home to over 60,000 UHNWis and over 1.5 million HNWIs.
In Latin America; Brazil and Mexico host the largest UHNWI populations, with the number of HNWIs in Mexico expected to increase from 158,901 to 192,393 by 2023 (~21% growth rate).
Further afield, the main wealth hubs in Africa continue to be South Africa and Nigeria. Currently home to about 1,033 and 724 UHNWIs respectively. Between 2018 and 2023, it is estimated that there will be a surge of approximately 18% in South African HNWIs over that 5 year period.
Looking ahead, those budding wealth hubs with an exponentially growing wealthy class will demand evermore private wealth advisory, tax planning and investment migration services.
The Power of the Passport
For those professionals advising clients on investment migration solutions, it is likely that, those jurisdictions which have a large affluent population but a lower ranked passport, will be interested in exploring citizenship by investment and golden visa options.
If this pandemic has taught society anything, it is the importance of having a “Plan B” – a second residence, a second passport – an exit plan when the situation locally is no longer tenable.
The option to travel freely or go to a second jurisdiction is a luxury that the affluent no longer wish for, but now need to have in their portfolio.
To assess the varying passports in emerging wealth hubs we used various indices including the Henley & Partners index, Arton’s Passport Index and the QNI index. Those ranked higer than 50 generally, or low quality on the QNI index (red) are where the most likely demand will arise, as well as wealth hubs where political instability is bubbling, such as Hong Kong. Brazil and Argentina have higher quality passports but due to the increasingly high taxes on wealth, numerous affluent families are seeking investment migration and asset protection solutions abroad.
Economic fallout in key wealth hubs – post pandemic
In order to assess the economic impact that the pandemic will have on key wealth hubs, we’ve used the latest International Monetary Fund (IMF) forecasts for 2020 and 2021. This allows us to look at which markets expect to expand or contract in the trying months that lie ahead. In Asia; Indonesia, India and Vietnam all are optimistic about their recovery in 2021. Nonetheless time will tell whether India and Indonesia, who have both been facing an uphill challenge against Covid-19 will in fact achieve their GDP forecasted growth rates by 2021.
At this present moment, LATAM and African markets are still due to face the peak of this wave of Covid-19 therefore any IMF forecasts will still be tried and tested. In order to mitigate the pandemic’s economic effect, governments will have to implement effective governance strategies and financial packages to soften the blow.
In the next section we explore the current penetration that Covid-19 has had on key wealth hubs to help us assess what the next year at least may bring.
Management of Covid 19
Countries have locked down across the globe to limit contagion and social distancing has become the new normal. To assess how wealth hubs are being impacted by this pandemic, we look into the number of reported cases per million and testing per million in each key market.
China, ground zero for this pandemic, has implemented stringent control measures and is well on its way to normalizing its situation and continuing the path towards economic recovery. Vietnam, one of the fastest growing economies in South East Asia has had remarkable success in curbing covid-19’s spread throughout its population.
South Africa, although more affected than other African nations, has undertaken a robust approach to testing its population in comparison to its neighbours.
Across the Atlantic, Brazil and Panama have also experienced a high number of cases. Due to Bolsonaro’s ineffective management of the situation, this virus will likely cause greater havoc in the Brazilian economy for the foreseeable future, likely motivating evermore HNWIs to seek greener pastures abroad.
When will the End Come?
Businesses, investors and workers from every corner are asking the same question “When will Covid-19 end?” in the hopes of seeking some light at the end of the tunnel. During this unsettling period, forecasts, predictions and estimations have been plaguing our newsfeeds as experts and ‘so-called experts’ all weigh in on when or if this pandemic will end and what lies beyond.
Adding to this sentiment, last month the WHO’s special envoy for Covid 19 informed that:
“We have all got to learn to live with this virus, to do our business with this virus in our presence, to have social relations with this virus in our presence and not to be continuously having to be in lock down because of the widespread infections that can occur,”
So, whilst we start to open up our borders, ease lockdowns and come to terms with this new “normal” we must also accept that for the foreseeable future Mr. Navarro is right. Covid-19 is part of our new reality.
Looking forward we should be taking a holistic assessment of global markets to tailor our business development plans for the coming year.
The critical question is how will our businesses adapt, what needs will our clients have and which wealth hubs will survive fastest in a post-pandemic world.
Which economies will recover fastest, protecting their current and future prosperity?
Which countries have the highest number of HNWIs , which of these would be interested in investment migration or wealth management solutions?
REFERENCES
Arab News : Singapore study predicts end of pandemic by December
